Janney Reiterates Buy Rating For Armada Hoffler Properties (NYSE: AHH) After Solid

Armada Hoffler Properties Inc (NYSE:AHH) posted a mostly solid quarter and provided encouraging guidance for 2016. Based on their assessment of Armada’s prospects, Janney analysts remain convinced that the stock is a buy. The analysts have also kept all their other previous estimates for 2016 for the company after the earnings report.

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Q4 Income Meets Expectations

Armada Hoffler posted funds from operations per share of $0.22 for the quarter, which on an adjusted basis comes to $0.24. That compares with Janney’s estimate of $0.23 and the consensus estimate of $0.24.

Armada’s cash same store net operating income (NOI) rose 4.5% YoY, supported by 6.7% YoY gain in retail, 3% gain in office and 2.3% gain in multifamily. On a GAAP basis, SS NOI was up 2% YoY, driven by 3.4% YoY gain in multifamily and 4.5% YoY gain in retail. The gains were offset by a 1.3% decline in office on a GAAP basis.

As for the full-year 2015, Armada’s cash SS NOI increased 5.5%, supported by 6.5%, 4.5% and 6.2% increases in office, retail and multifamily, respectively.

Portfolio occupancy

Janney noted that Armada Hoffler’s core portfolio occupancy dropped 30bps to 95.3%. The problem came from a 30bps decline in office occupancy, which partially offset 70bps occupancy increases in both multifamily and retail.

$170.5 million turned to acquisitions

Armada sold certain properties in Q4 and is using the proceeds to acquire other assets in the current quarter. The company spent $170.5 million on acquisitions, having sold a 154,000-square-feet Oceaneering building for $30 million. The company also disposed of 207,000-square-feet Richmond Tower office building for $78 million.

The $170.5 million acquisition saw Armada add 11 retail properties to its portfolio.

2016 guidance

Janney is impressed by Armada Hoffler’s 2016 guidance. The company is looking for FFOPS in the band of $0.93-$0.97 for the year. That compares with Janney’s estimate of $0.91 and the consensus target of $0.93. The GAAP net operating income is also expected to rise over the 2015 figure. Armada is modeling GAAP NOI of $62.3 to $63 million, which compares with $54 million in 2015.

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